Tuesday, October 7, 2008

What has Congress done to us?

Former president Theodore Roosevelt, writing in the introduction to The Writings of Abraham Lincoln, Volume 1, said "[Abraham Lincoln's] life teaches our people that they must act with wisdom, because otherwise adherence to right will be mere sound and fury without substance; and that they must also act high-mindedly, or else what seems to be wisdom will in the end turn out to be the most destructive kind of folly."

Surely the Democrat party, with all its intent to do good, has failed to act with either wisdom or high-mindedness with regard to FNMA and FHLMC (fannie-mae and freddy-mac). Government meddling in the free market economy is virtually never wisdom and there is more than 40 centuries of recorded history that clearly establishes this as fact. Therefore, the attempt by liberals to somehow force housing to be "more affordable" or "more available" to those in our economy who may or may not value real property was likely ill-fated from the outset.

On the one hand there are those who live within our economic framework that will simply take advantage of any government handout for their own benefit. They may do so legitimately or they may do so through some deceit or fraud, but they have they view government support as an "entitlement" and not as "a hand up" from their current situation. Indulge me in a personal anecdote.

Back in the 1980s, I worked as vice-president for a builder-developer in a major metropolitan area. We were involved in the Section 8 housing market (i.e., federally subsidized housing for the elderly and poor). We built several large projects, and in the eleventh month after occupancy of the project, one of my responsibilities was the "walk-through" with the HUD (U.S. Department of Housing and Urban Development) inspector before the conclusion of the warranty period. By the eleventh month, our projects were virtually always 100% occupied. Therefore, this "walk-through" was a walk through people's occupied residence.

To the best of my recollection, I would say that some 60% to 80% of the project residences (for the so-called "poor", not so with the "elderly") we walked through in these inspections had one thing in common -- things that I could not afford to own! There were cars in the driveway that I couldn't afford. They were grilling steaks on patio grilles that I could not afford. They had televisions or stereo systems that I could not afford. What government-subsidized housing had done for many of these people was to free up cash that they could spend on tricked-out cars, fancy gadgets, and a home menu that was beyond my means as VP of the company that built these homes "for the poor."

From another perspective, there are those that simply should not hold real property (real estate) because they have no care nor concern for the value they hold. They allow such properties to fall into disrepair, thus destroying economic value for themselves, their neighbors, and the whole economy. Value is created and destroyed by our actions, and some persons simply do not understand -- or care to understand -- these matters. One of my own children, a son of 22 years age, is one such individual. He should not be permitted to own real estate in his current state of mind and a normalized credit market (not a "subprime" credit market) would rightly preclude him from such ownership position. This very appropriate denial would properly help to protect the value of all real estate.

The great thing about the United States as the bastian of capitalism and free-market economics is equal opportunity. Every American should have the "opportunity" to buy a home, but not every American should be able to buy a home. The ability to buy a home should be dictated, not by government regulation or some creature of the state (e.g., FNMA), but by free-market economics driving the availability of credit and the proposed buyer's own credit worthiness.

The liberal Democrat's ill-conceived attempts to create equal outcomes rather than equal opportunities will always lead to imbalances in the market place and will always be costly to rectify. The costs will be paid by every citizen through the (more or less) painful and always unavoidable shaking that shows that a market correction is in progress.

May God rescue us from well-intentioned men and women who lack wisdom and high-mindedness.

More on the matter of "high-mindedness" in my next blog.

-- Richard

1 comment:

Sam said...

a son of 24 years of age!